SEATTLE, Jan. 30 -- In a decision that could trigger the largest dam-removal project in world history, the federal government said today that four hydroelectric dams on the troubled Klamath River must undergo costly modifications to allow passage for salmon.

Since modifying the aging dams would cost an estimated $300 million, removing them has suddenly become a much more plausible -- and considerably cheaper -- option for their owner, PacifiCorp, a company owned by Warren E. Buffett's Berkshire Hathaway Inc.

Removing the dams would cost $101 million less than modifying them as ordered by federal agencies, according to a recent report written for the California Energy Commission.

Although a number of dams across the United States and around the world have been removed or scheduled for removal in recent years, federal officials say they know of no other river in the world for which the removal of four hydroelectric dams is under review.

If the dams were removed, the Klamath, which straddles the Oregon-California border, has extraordinary potential to rebound as a major salmon resource, according to fish biologists and regional officials. They say a revival could dramatically improve commercial and sport fisheries along the coasts of Oregon and Northern California.

The Klamath once supported the third-largest runs of salmon on the West Coast. But in the more than eight decades since it was dammed, it has become one of the most fought-over rivers in the West -- with massive fish kills, blooms of algae, angry irrigators, litigious environmentalists and Indian tribes whose diet and culture have been substantially damaged by the disappearance of salmon. Biologists blame the dams as a contributing factor to the near shutdown last summer of commercial salmon fishing along 700 miles of the Oregon-California coastline.

The four dams produce electricity for about 70,000 customers. The power is worth about $29 million a year, according to the California Energy Commission.

"The Klamath is a degraded system, but it is uniquely restorable," said David Diamond, an analyst with the Interior Department. "These dams are the only barriers to fish passage from the headwaters to the Pacific. The watershed is 80 percent under federal ownership and it doesn't have major cities or other development that prevents the return of healthy salmon runs."

For years, pressure to remove the four Klamath dams has come from Indian tribes, conservation groups and commercial fishermen. But in a move that surprised many environmentalists, the Bush administration -- through the National Oceanic and Atmospheric Administration's National Marine Fisheries Service -- concluded last year that dam removal would be best for salmon.

The issue has been forced on PacifiCorp because federal licenses for the dams, the oldest of which was completed in 1918, are up for renewal. The Portland, Ore., power company had proposed that it be allowed to trap and haul salmon around its dams as a way to revive the river's salmon fishery.

But the joint announcement by the Interior Department and NOAA rejects that proposal. As a necessary condition for obtaining a new federal license, they said that PacifiCorp must build costly fish ladders and other fish-passage devices at each of the dams on the Klamath.

"We are disappointed," said Dave Kvamme, a spokesman for PacifiCorp. "We are looking for an outcome that best serves our customers. We are going to have to look at costs and risks."

In three other license-renewal cases, PacifiCorp has agreed to remove dams from Western rivers. The company, too, has participated for more than two years in confidential negotiations with other Klamath River stakeholders in what to do about reviving the health of the river.

"We have never ruled out dam removal as one potential outcome," Kvamme said, while adding that his company urgently needs to create more electricity generation and regards the dams as "an extremely valuable resource."

Buffett, whose holdings include PacifiCorp, is a major shareholder in The Washington Post.

In the six Western states where PacifiCorp sells electricity, the company would need to secure the approval of public utility commissions to raise electricity rates to recover the cost of demolishing or modifying the Klamath dams.

Because removing the dams would be cheaper than modifying them, there will be strong pressure on PacifiCorp from the commissions to get rid of them, said Steve Rothert, director of the California field office of American Rivers, an environmental group involved in negotiations over the dams.

"It is in their ratepayers' interest to remove the dams and replace the power," Rothert said.

Kvamme said PacifiCorp has not yet determined whether modifying the dams would be less expensive in the long run than taking them out.